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Taiwanese sources reveal that Sony have signed contracts with manufacturers Foxconn and Pegatron to make a new smaller version of Playstation 3. Rumours of PS3 Slim were running hot prior to E3, but Sony opted out of revealing a new PS3 model at that time.
According to Engadget that's not all the reports are saying. It is also claimed that this will be the final revision of the Playstation 3 hardware and that a successor with built in motion sensing capabilities will be launched next spring. We agree with Engadget that this makes little sense.
Taiwanese reports may not always be the most reliable, but there is a bit too much smoke around for something not to be burning.